MADNESS IN MEDICARE: BAYOU CASTS …...This Note analyzes the practical effects of the Eleventh Cir-cuit’s In re Bayou Shores SNF decision by considering statistics on rising Medicare

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MADNESS IN MEDICARE: BAYOU CASTS UNCERTAINTY OVER THE FUTURE OF NURSING FACILITY BANKRUPTCIES

SAMUEL J. SENECZKO*

Currently, there is a circuit split between the Ninth and Eleventh Circuits regarding whether bankruptcy courts have jurisdiction over a Medicare or Medicaid dispute under Title 42, § 405(h) of the U.S. Code. If the bankruptcy court does not have jurisdiction over a Medicare pro-vider agreement dispute, as the Eleventh Circuit recently held in In re Bayou Shores SNF, the nursing facility is effectively unable to bring its case before the bankruptcy court and potentially denied an opportunity to reorganize. This Note analyzes the practical effects of the Eleventh Cir-cuit’s In re Bayou Shores SNF decision by considering statistics on rising Medicare costs, projected elderly population growth, increase in the number of people expected to use long-term care, and a recent increase in nursing home Chapter 11 filings. Additionally, this Note examines the po-tential reorganization hurdles nursing facility debtors may face if their Medicare claims are adjudicated through the HHS’s review process. This Note further argues that In re Bayou Shores SNF is contradictory to many of the congressional policies of bankruptcy law. Lastly, this Note recom-mends that because the Supreme Court has denied certiorari to resolve the circuit split, bankruptcy courts should exercise jurisdiction over Medi-care disputes under 42 U.S.C. § 405(h)—while using discretionary factors to abstain from hearing especially complex Medicare issues. This recom-mendation places an emphasis on the congressional-endorsed objective of providing an expeditious and efficient bankruptcy process for the debtor, while balancing the interests of the Department of Health and Human Services to process complicated Medicare disputes.

* This Note is dedicated to my family, for providing me with constant love and support—and specifi-cally to my Dad, for instilling in me his passion for education, learning, and all things concerning the Universi-ty of Illinois. Thank you to my Note Editor, Jackie McCaffery, for your continuous help in editing and revising my Note, and to the editors and staff of the University of Illinois Law Review for their countless hours spent working on our journal. Lastly, thank you to Professors Brubaker, Lawless, and Tabb for providing a wonderful bankruptcy curriculum at the University of Illinois. Your classes consistently challenged me and enabled me to pursue my interest in bankruptcy law.

430 UNIVERSITY OF ILLINOIS LAW REVIEW [Vol. 2019

TABLE OF CONTENTS I. INTRODUCTION ........................................................................................430II. BACKGROUND ..........................................................................................431

A. Statutory Provisions for Bankruptcy Jurisdiction and Medicare Claims ......................................................................433

B. The Ninth Circuit’s Plain-Meaning Analysis ..................................434C. The Eleventh Circuit’s Codification Analysis .................................437

III. ANALYSIS ................................................................................................441A. Realities and Results of Bayou ........................................................441

1. Growing Need for Sound Healthcare Bankruptcy Law ...........4432. The HHS Administrative Review Process and Bankruptcy ......4443. Delay Is Inconsistent with Congressional Intent ......................447

B. Do Bankruptcy Courts Have Special Jurisdictional Status? ...........4491. Bayou’s Distinction of “Courts” and “Agencies” ..................4492. Bayou Views Diversity Lawsuits as Similar to

Bankruptcy Claims ...................................................................4523. Interests of the HHS Versus Bankruptcy Debtors ....................453

C. Uniformity in Bankruptcy Law and Venue Shopping ......................455D. Exclusive Jurisdiction over Property of the Estate .........................456

IV. RECOMMENDATION .................................................................................458A. Bankruptcy Courts’ Power to Abstain .............................................459B. Abstention Factors ..........................................................................461

V. CONCLUSION ............................................................................................462

I. INTRODUCTION

Imagine a world where you have just been told your granny’s Florida nursing facility is insolvent and on the brink of closing. You are assured that granny will be able to stay put because the nursing facility will simply avail it-self to the protection of the federal bankruptcy courts. Yet, due to the federal law applied in that circuit, the Florida bankruptcy court is unable to hear the nursing facility’s case.1

Now, move across the country. If that same nursing facility were in Cali-fornia, its case would be heard, and granny could stay put while the nursing fa-cility organizes its affairs.2 What gives? The same federal law that is supposed to lead to uniform results instead reaches drastically different outcomes de-pending on to what part of the country granny decided she wanted to retire.

This is the current state of affairs in bankruptcy law. After a recent Elev-enth Circuit decision, circuit courts are divided on whether bankruptcy courts can hear cases regarding nursing facilities that rely on Medicare provider

1. See infra Section II.C. 2. See infra Section II.B.

No. 1] MADNESS IN MEDICARE 431

agreements.3 To make matters worse, the Supreme Court recently denied certi-orari, leaving the issue unresolved and a majority of courts without guidance.4 As more Americans reach the age of retirement,5 healthcare becomes a bigger player in bankruptcy than ever before; yet the nation’s Bankruptcy Code is un-able to offer uniform results.6

This Note examines the unresolved circuit split regarding bankruptcy ju-risdiction over Medicare claims and the substantial impact it may have on nurs-ing facilities in the United States. Part II of this Note examines recent differing opinions in the Ninth and the Eleventh Circuit regarding bankruptcy courts’ ju-risdiction over Medicare disputes under Title 42 of the U.S. Code, Section 405(h).7 Part III analyzes the applicable case law and future legal issues that bankruptcy courts will face when deciding Medicare disputes. Additionally, Part III examines policy concerns unique to bankruptcy law overlooked in rele-vant court decisions. Part IV provides a recommendation that would produce uniform results in bankruptcy law across the nation, while still considering the administrative interests of the Department of Health and Human Services (“HHS”). Specifically, this Note recommends bankruptcy courts should exer-cise jurisdiction over Medicare disputes, but only after examining the absten-tion provisions in §§ 305(a) and 1334(c) of the U.S. Code .8 Bankruptcy courts should examine a series of factors to determine whether the complexity of Medicare disputes and the need for administrative review outweighs a nursing facility’s need for an expeditious and efficient hearing.

II. BACKGROUND

Long-term nursing care for seniors comes in a variety of different forms and offers a variety of different services, including nursing homes, skilled nurs-ing facilities, assisted-living facilities, hospice facilities, and adult family homes.9 These facilities offer many benefits for seniors, such as twenty-four-hour comprehensive care and specialized services. 10 Yet nursing facilities also

3. BILL ROCHELLE, AM. BANKR. INST., ROCHELLE’S DAILY WIRE: ABUNDANT SPLITS AND OTHER SIGNIFICANT DECISIONS 39–41 (2016), http://www.acba.org/portals/0/pdf/Bankruptcy/2016/PGH2016.pdf. 4. Florida Agency for Health Care Admin. v. Bayou Shores SNF (In re Bayou Shores SNF), 828 F.3d 1297 (11th Cir. 2016), cert. denied, (U.S. June 5, 2017) (No. 16-967), https://www.supremecourt. gov/search.aspx?filename=/docketfiles/16-967.htm [hereinafter Cert. denied]. 5. See Glen Kessler, Do 10,000 Baby Boomers Retire Every Day?, WASH. POST (July 24, 2014), https:// www.washingtonpost.com/news/fact-checker/wp/2014/07/24/do-10000-baby-boomers-retire-every-day/ (citing SOCIAL SECURITY ADMINISTRATION, ANNUAL PERFORMANCE PLAN FOR FISCAL YEAR 2013 52 (Feb. 2012)) (“By 2015, almost 33 percent of our workforce, including 48 percent of our supervisors, will be eligible to re-tire.”). 6. Compare Section II.B, with Section II.C (discussing different interpretations of bankruptcy jurisdic-tion among the Ninth and Eleventh Circuits). 7. See generally 42 U.S.C. § 405(h) (2012). 8. See generally 11 U.S.C. § 305(a) (2012); 28 U.S.C. § 1334(c) (2012). 9. LTSS Information: Facility-Based Care, CMS.GOV (June 22, 2016, 10:55 AM), https://www. cms.gov/Outreach-and-Education/American-Indian-Alaska-Native/AIAN/LTSS-TA-Center/info/facility-based-care.html [hereinafter LTSS Information]. 10. Id.


have high operating costs and often rely on minimal occupancy levels for fi-nancial viability.11 Thus, a significant portion of nursing facility funding comes from Medicare, which makes up a total of 15% of federal spending and is ex-pected to grow 17.5% by 2027.12

Medicare requirements for individuals are uniform across the states13 and can cover many senior healthcare services, including noncustodial nursing home care, skilled nursing facilities, hospital care, and hospice.14 Studies sug-gest that “[m]edicare per capita spending is projected to grow at an average an-nual rate of 4.6% over the next 10 years . . . .”15 Additionally, the percentage of the population using long-term care services is also expected to grow.16 The number of individuals using paid long-term care services in assisted living, skilled nursing facilities, or other facilities is projected to double from 13 mil-lion in 2000 to 27 million in 2050.17

The steady growth of Medicare and the growing elderly population sug-gests that nursing facilities should be thriving; however, a significant number have struggled with insolvency.18 For example, in early 2000, Kansas City lost seven large nursing homes to bankruptcy in just a six-month span.19 This mir-rored the nation at that time, where an estimated 10% of nursing homes were in bankruptcy, accounting for a total of 1,651 skilled nursing facilities. 20 A decade later, insolvency problems continued to plague nursing facilities. From 2010–2014, bankruptcy filings for nursing facilities increased to 38%, despite total Chapter 11 bankruptcy filings decreasing by 60%.21 With a growing elderly population and a need for long-term care, bankruptcy law should provide solu-tions for struggling nursing facilities. Yet, under the current circuit split, many nursing facilities reliant on Medicare may find themselves turned away at the steps of the bankruptcy courthouse.

11. Id. 12. Juliette Cubanski & Tricia Neuman, The Facts on Medicare Spending and Financing, KAISER FAMILY FOUND. (June 22, 2018), https://www.kff.org/medicare/issue-brief/the-facts-on-medicare-spending-and-financing/. 13. LTSS Information, supra note 9. 14. What Medicare Covers: What Part A Covers, MEDICARE.GOV, https://www.medicare.gov/what-medicare-covers/what-part-a-covers (last visited Nov. 3, 2018). 15. Cubanski & Neuman, supra note 12. 16. HHS ET AL., REPORT TO CONGRESS: THE FUTURE SUPPLY OF LONG-TERM CARE WORKERS IN RELATION TO THE AGING BABY BOOM GENERATION, at v (2013). 17. Id. 18. See infra notes 19–21. 19. Dan Margolies & Julius A. Karash, Nursing Home Operator’s Bankruptcy Points Up Industry’s Fra-gility, J. TIMES (Feb. 5, 2000), http://journaltimes.com/nursing-home-operator-s-bankruptcy-points-up-industry-s-fragility/article_091b4be6-ef43-56ad-808e-09caae69f808.html. 20. Id. 21. Katie Thomas, Facing Suits, a Nursing Home in California Seeks Bankruptcy, N.Y. TIMES (Feb. 17, 2015), https://www.nytimes.com/2015/02/18/business/facing-suits-a-nursing-home-seeks-bankruptcy.html.


A. Statutory Provisions for Bankruptcy Jurisdiction and Medicare Claims

The issue surrounding nursing facilities in bankruptcy is a jurisdictional question of whether a bankruptcy court can hear a nursing facility’s case when a Medicare dispute arises.22 This issue begins with how bankruptcy courts de-rive their jurisdiction. Bankruptcy courts’ jurisdiction originates from 28 U.S.C. § 1334, which provides: “the district court shall have original and exclu-sive jurisdiction of all cases under title 11. . . . [T]he district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to a case under title 11.”23 Bankruptcy courts may hear bankruptcy cases on behalf of the district court under 28 U.S.C. § 157, which states:

Each district court may provide that any or all cases under title 11 and any or all proceedings arising under title 11 or arising in or related to a case under title 11 shall be referred to the bankruptcy judges for the district. Bankruptcy judges may hear and determine all cases under title 11 and all core proceedings under title 11, or arising in a case under title 11 . . . . 24

Thus, bankruptcy courts—through §§ 1334 and 157 of the U.S. Code—exercise jurisdiction over bankruptcy cases and proceedings in federal court.25

Statutory law for Medicare claims is generally found under 42 U.S.C. § 1395, enacted as Title XVIII of the Social Security Act.26 Instead of provid-ing directly for review of Medicare claims in § 1395(ii) of Title XVIII, the stat-ute expressly cross-references § 405(h) of the broader Social Security Act to provide for review of Medicare claims, stating: “subsection . . . (h) . . . of sec-tion 405 of this title, shall also apply with respect to this subchapter” and “any reference therein to the Commissioner of Social Security . . . shall be consid-ered a reference to the Secretary of the Department of Health and Human Ser-vices, respectively.”27 The Supreme Court noted that “Social Security provi-sion, 405(h), channels most, if not all, Medicare claims through this special review.”28 Thus, to bring a Medicare claim in any court, the petitioner must look to 42 U.S.C. § 405(h) of the Social Security Act (“§ 405(h)”).29

Whether a Medicare dispute can be heard first in bankruptcy court stems from the statutory language of § 405(h):

22. See ROCHELLE, supra note 3. 23. 28 U.S.C. § 1334(a)-(b) (2012). 24. 28 U.S.C. § 157(a)-(b)(1) (2012). 25. WILLIAM L. NORTON III, 1 NORTON BANKR. L. & PRAC. 3d § 4.2 (2017).

[T]he bankruptcy courts, subject to the limitation in 28 U.S.C.A. § 157(c)(1) . . . in practice exercise juris-diction over virtually all phases of bankruptcy cases and proceedings by virtue of the general reference, pursuant to 28 U.S.C.A § 157(a), of all existing and future bankruptcy cases and proceedings by every district court to the bankruptcy judges of the district.

Id. 26. HARVEY L. MCCORMICK, MEDICARE & MEDICAID CLAIMS AND PROCEDURES 43 (4th ed. 2005). 27. 42 U.S.C. § 1395ii (2012). 28. Shalala v. Illinois Council on Long Term Care, Inc. 529 U.S. 1, 9 (2000) (“Section 1395ii makes § 405(h) applicable to the Medicare Act ‘to the same extent as’ it applies to the Social Security Act.”). 29. See 42 U.S.C. § 1395ii (2012); Shalala, 529 U.S. at 8.


Social Security after a hearing shall be binding upon all individuals who were parties to such hearing. No findings of fact or decision of the Com-missioner of Social Security shall be reviewed by any person, tribunal, or governmental agency except as herein provided. No action against the United States, the Commissioner of Social Security, or any officer or em-ployee thereof shall be brought under section 1331 or 1346 of title 28 to recover on any claim arising under this subchapter.30

When the statute is broken down, it is apparent why the language of § 405(h) presents a bankruptcy-specific issue. First, for purposes of bringing a Medicare claim, § 405(h) effectively provides that a Medicare dispute cannot first be brought in a district court under 28 U.S.C. §§ 1331 or 1346.31 Yet § 405(h) does not expressly prohibit a Medicare claim brought under § 1334, where bankruptcy jurisdiction originates.32 Thus, the circuit split centers upon whether the exclusion of § 1334 means a Medicare claim can first be brought in a bankruptcy court, instead of being subject to the administrative review of the HHS.33 This is especially significant in nursing facility cases where Medicare service provider agreements can lead to claims against the estate that must be resolved during a bankruptcy case.34

B. The Ninth Circuit’s Plain-Meaning Analysis

The Ninth Circuit, in In re Town & Country Home Nursing Services, Inc.,35 (“Town & Country”) was the first circuit to consider whether the exclu-sion of bankruptcy jurisdiction under § 1334 in § 405(h) left a bankruptcy court with authority to hear a Medicare dispute before administrative review.36 The facts involved an in-home nursing service provider, T & C, who filed a Chapter 11 bankruptcy in 1985.37 While reorganizing its affairs in bankruptcy court, T & C brought a claim against the HHS for deducting $88,700 from its service provider agreements due to an overpayment calculation error that occurred while T & C was operational.38 The Medicare dispute revolved around whether the HHS was required to reimburse T & C for a payment error because they

30. 42 U.S.C. § 405(h) (2012) (emphasis added). 31. Id.; see Weinberger v. Salfi, 422 U.S. 749, 757–59 (1975) (holding that a district court did not have jurisdiction under 405(h)). 32. See supra notes 28–31 and accompanying text. 33. See ROCHELLE, supra note 3. 34. 11 U.S.C. § 101(5)(A) (2012) (“[C]laim means – (A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.”); see also Peter R. Roest, Recovery of Medicare and Medicaid Over-payments in Bankruptcy, 10 ANNALS OF HEALTH L. 1, 6–7 (2001) (noting that Medicare overpayments for prepetition services constitute “claims”). 35. See generally Sullivan v. Town & Country Home Nursing Servs., Inc. (In re Town & Country Home Nursing Servs., Inc.), 963 F.2d 1146 (9th Cir. 1991). 36. See Donna Higgins, High Court Asked to Decide If Bankruptcy Courts Can Hear Medicare Act Claims, 21 WESTLAW J. BANKR. 2, 2–3 (2017). 37. In re Town & Country Home Nursing Servs., Inc., 963 F.2d at 1148. 38. Id.


were a healthcare service provider under the Medicare Act. 39 T & C believed it should be reimbursed by the Secretary of HHS, who is responsible for correct-ing payment errors.40

In the bankruptcy case, T & C brought its Medicare dispute against the HHS because T & C believed, under § 1334(b), the bankruptcy court had juris-diction to hear the Medicare service provider dispute because the money was crucial to T & C’s business and related to property of the estate.41 The Secre-tary of the HHS disagreed with T & C, arguing that the claim needed to first be disputed with the HHS under administrative review due to § 405(h)’s “thresh-old requirement of administrative exhaustion.”42

The Ninth Circuit examined whether the language of § 405(h) and the ex-clusion of bankruptcy jurisdiction under § 1334 from other federal court juris-diction prohibited bankruptcy courts from reviewing Medicare claims.43 The Ninth Circuit held that “Section 405(h) only bars actions under 28 U.S.C §§ 1331 and 1346; it in no way prohibits an assertion of jurisdiction under section 1334.”44 The court examined the plain language of the statute and considered the policy rationales behind excluding the bankruptcy courts from the list of prohibited claims in § 405(h).45 The Ninth Circuit reasoned that § 1334 was in-tentionally broad: “[t]his section allows a single court to preside over all of the affairs of the estate, which promotes a ‘congressionally-endorsed objective: the efficient and expeditious resolution of all matters connected to the bankruptcy estate.’”46

The Ninth Circuit has decided several similar cases post-Town & Country, but its decision that bankruptcy courts are not precluded from hearing Medicare claims still stands.47 First, in Kaiser v. Blue Cross of California (“Kaiser”), the Ninth Circuit appeared to contradict its earlier holding in Town & Country.48 The case involved a home health agency that was a Medicare service provider operating under intermediary Blue Cross of California.49 The health agency filed for Chapter 7 bankruptcy and brought a claim against Blue Cross and the

39. Id. at 1147–48. 40. Id. (citing 42 U.S.C. § 1395g (2012); 42 C.F.R. § 413.60 (1990)). 41. In re Town & Country Home Nursing Servs., Inc., 963 F.2d at 1154 (“T & C, on the other hand, con-tends that the bankruptcy court had a separate and distinct basis for exercising jurisdiction because T & C’s counterclaims related to property of the estate . . . .”); see also 11 U.S.C. § 362(a) (2012) (providing that gener-ally property and legal interests of the estate are subject to the automatic stay upon filing of bankruptcy court); 11 U.S.C. § 541(a) (2012). 42. In re Town & Country Home Nursing Servs., Inc., 963 F.2d at 1154. 43. Id. at 1155. 44. Id. 45. Id. 46. Id. (citations omitted). 47. See cases cited infra notes 49, 58 and accompanying text. 48. See Kaiser v. Blue Cross of Cal., 347 F.3d 1107, 1115 (9th Cir. 2003); see also Florida Agency for Health Care Admin. v. Bayou Shores SNF (In re Bayou Shores SNF), 828 F.3d 1297, 1312 (11th Cir. 2016) (“Kaiser at least hints that the court would have come to the opposite conclusion of In re Town & Country, i.e. by holding that bankruptcy jurisdiction could not trump the exhaustion requirements of §§ 405(g) and (h).”). 49. Kaiser, 347 F.3d at 1109.


HHS Secretary.50 The Ninth Circuit held that the health agency must proceed under § 405(g) and “satisfy the presentment and exhaustion requirements under that subsection prior to seeking judicial relief.”51 This holding meant the health agency must undergo administrative review before bringing a proceeding in federal court.52

Opponents of the Ninth Circuit’s Town & Country decision have turned to Kaiser to devalue Town & Country.53 The cases, however, have a different background. Kaiser was based around the question of whether the claims “arose under” Medicare and were thus subject to the administrative review of § 405(g).54 Notably, this is different from Town & Country, which examined whether the exclusion of § 1334 from § 405(h) meant a bankruptcy court had jurisdiction to hear a Medicare claim.55

The Ninth Circuit addressed this issue in Do Sung Uhm.56 As with bank-ruptcy jurisdiction under § 1334, diversity jurisdiction under 28 U.S.C § 1332 is also excluded from Medicare in § 405(h).57 Yet despite § 1332’s exclusion, courts have held that Medicare claims under § 1332 are subject to administra-tive review before they can be heard by a federal court in diversity.58 Therefore, the Ninth Circuit was faced with the argument that § 1334’s exclusion should be treated the same as § 1332, and that in both instances, the claims should first be subject to administrative review.59 Yet, in a footnote, the Ninth Circuit noted that, importantly, §§ 1334 and 1332 have distinct purposes, and unlike federal courts sitting in diversity, bankruptcy courts have a special status and must be able to hear all claims and proceedings.60 Therefore, Town & Country still gov-erns in the Ninth Circuit, and bankruptcy courts may hear claims under the Medicare Act.

50. Id. 51. Id. at 1115. 52. See, e.g., 42 U.S.C. § 405(g) (2012). 53. See In re Bayou Shores SNF, 828 F.3d at 1312. 54. Kaiser, 347 F.3d at 1111 (“We ask first whether the Kaisers’ claims arise under Medicare, requiring them to have exhausted their administrative remedies.”). 55. Sullivan v. Town & Country Home Nursing Servs., Inc. (In re Town & Country Home Nursing Servs., Inc.), 963 F.2d 1146, 1149 (9th Cir. 1991) (“[D]oes the bankruptcy court lack jurisdiction because the Medicare Act or Federal Tort Claims Act provides the exclusive remedy for T & C’s claims?”). 56. Do Sung Uhm v. Humana, Inc., 620 F.3d 1134, 1140 (9th Cir. 2010). 57. Id. at 1140–41 n.11. 58. See Nichole Med. Equip. & Supply, Inc. v. TriCenturion, Inc., 694 F.3d 340, 346–47 (3d Cir. 2012); Midland Psychiatric Assocs., Inc. v. United States, 145 F.3d 1000, 1004 (8th Cir. 1998); Bodimetric Health Servs., Inc. v. Aetna Life & Cas., 903 F.2d 480, 488–90 (7th Cir. 1990). 59. Do Sung Uhm, 620 F.3d at 1140. The Eleventh Circuit suggested that the cases deciding § 1332 were applicable to bankruptcy cases under § 1334 when it stated, “we align ourselves with the Seventh, Eighth, and Third Circuits, and hold that § 405(h) bars § 1334 jurisdiction.” Florida Agency for Health Care Admin. v. Bayou Shores SNF (In re Bayou Shores SNF), 828 F.3d 1297, 1314 (11th Cir. 2016). 60. Do Sung Uhm, 620 F.3d at 1140–41 n.11.


C. The Eleventh Circuit’s Codification Analysis

The Eleventh Circuit recently disagreed with the Ninth Circuit’s Town & Country decision.61 On July 11, 2016, the Eleventh Circuit in In re Bayou Shores SNF (“Bayou”) held bankruptcy courts do not have jurisdiction to hear Medicare disputes under § 405(h).62 The court’s rationale hinged largely on a complex analysis of “codification error” of § 405(h).63 The court reasoned that Congress never substantively changed the text of § 405(h) to give bankruptcy courts jurisdiction over Medicare disputes.64 Instead, it was an error that slipped through the cracks when codifying the statute.65 The Eleventh Circuit’s holding in Bayou is significant because it splits from the Ninth Circuit’s Town & Country holding,66 which the Supreme Court recently declined to review.67

Bayou’s fact pattern is similar to Town & Country: a large nursing facility filed a Chapter 11 bankruptcy with the goal of restructuring its debts in a pay-ment plan, rather than liquidating.68 The nursing facility aimed to continue its operations and provide care for its residents, while it gradually repaid its debts over the course of the Chapter 11 payment plan.69 The Florida nursing facility in Bayou received approximately 90% of its revenue from its Medicare and Medicaid patients.70 The court explained the nursing facility’s process of ob-taining Medicare revenue: “[t]o be eligible for the Medicare/Medicaid program, Bayou Shores entered into so-called ‘provider agreements’ with the federal and Florida state governments, respectively, which provide reimbursement to Bay-ou Shores for the provision of medical services to Bayou Shores’ Medi-care/Medicaid patients.”71 As an administrative agency, the HHS monitors nursing facilities using provider agreements to ensure the facilities follow ap-plicable administrative requirements and do not “pose immediate jeopardy to the health or safety of the facility’s patients.”72

In Bayou, the nursing facility was issued a series of regulatory violations from February to July 2014, wherein the HHS warned Bayou Shores of its defi-

61. See In re Bayou Shores SNF, 828 F.3d at 1322. 62. Id. at 1304. 63. Id. at 1314. 64. Id. 65. Id. at 1319. 66. See, e.g., ROCHELLE, supra note 3. 67. Cert. denied, supra note 4. 68. In re Bayou Shores SNF, 828 F.3d at 1302; Sullivan v. Town & Country Home Nursing Servs., Inc. (In re Town & Country Home Nursing Servs., Inc.), 963 F.2d 1146, 1148 (9th Cir. 1991). 69. See WILLIAM L. NORTON JR. ET AL., NORTON BANKRUPTCY LAW AND PRACTICE 3D § 91:1 (2018) (“It is often said that Chapter 11 (as distinct from Chapter 7) permits the debtor to continue to operate while devising a plan for its rehabilitation or survival.”). See generally David A. Samole, Health Care Bankruptcy: Not an Ordinary Chapter 11 Case, LAW360 (Mar. 16, 2017, 11:24 AM), https://www.law360.com/articles/9017 37/health-care-bankruptcy-not-an-ordinary-chapter-11-case. 70. In re Bayou Shores SNF, 828 F.3d at 1300–01. 71. Id. at 1301. 72. Id.


ciencies, and gave the facility an opportunity to remedy its problems.73 On July 22, 2014, the HHS determined Bayou Shores’s noncompliance was a threat to the residents’ health and safety and used its regulatory discretion to terminate Bayou Shores’s Medicare provider agreement.74 The nursing facility first sought injunctive relief from the district court to stop the termination of its pro-vider agreement.75 When the district court denied Bayou Shores’s emergency injunction for failing to first exhaust available administrative remedies, the nursing facility filed for Chapter 11 bankruptcy, invoking the automatic stay and temporarily stopping the HHS from terminating its provider agreements.76 In deciding whether to hear the dispute, the bankruptcy court “heard testimony from doctors, patients and other Bayou Shores witnesses.”77 After weighing the evidence, the bankruptcy court decided there were no immediate risks to the patients and issued an order to stop the HHS from terminating the Medicare provider agreements, later confirming Bayou Shores’s Chapter 11 plan.78 Bay-ou presented an essential question: should the exclusion of bankruptcy jurisdic-tion from § 405(h) give a bankruptcy court authority to decide the status of the Medicare provider agreements before any HHS administrative hearings have taken place?79 Contrary to the Ninth Circuit, the Eleventh Circuit held it should not.80 The Eleventh Circuit’s analysis of § 405(h) went beyond the text of § 405(h) itself and examined the statute’s origins through its legislative history. The Eleventh Circuit concluded, “it is clear that the Office of the Law Revision Counsel made an error in revising § 405(h) in 1976 (and again in 1982).”81 The court reasoned this was a codification error because any intent for an expansion of bankruptcy jurisdiction in the Medicare Act would have been clearly ex-pressed in the legislative history before being implemented into the text of § 405(h).82

First, the Eleventh Circuit analyzed the original text of § 405(h) from 1939, along with the history of federal court jurisdiction.83 In 1939, all district and bankruptcy court jurisdiction laws were codified under Section 24 of the

73. Id. at 1301–02. 74. Id. at 1302. 75. Id. 76. Id. at 1302–03; see 11 U.S.C. § 362(a) (2012).

The automatic stay is one of the fundamental debtor protections provided by the bankruptcy laws. It gives the debtor a breathing spell from his creditors . . . stops all collection efforts, all harassment, and all fore-closure actions . . . permits the debtor to attempt a repayment or reorganization plan, or simply to be re-lieved of the financial pressures that drove him into bankruptcy.

WILLIAM L. NORTON JR. ET AL, 10 NORTON BANKRUPTCY LAW & PRACTICE 3D § 362 (2017). 77. In re Bayou Shores SNF, 828 F.3d at 1303. 78. Id. 79. Id. at 1300 (“Now the central question is whether the statutory revision in this case demonstrated Congress’s clear intention to vest the bankruptcy courts with jurisdiction over Medicare claims.”). 80. Compare id. at 1322, with Sullivan v. Town & Country Home Nursing Servs., Inc. (In re Town & Country Home Nursing Servs., Inc.), 963 F.2d 1146, 1155 (9th Cir. 1991). 81. In re Bayou Shores SNF, 828 F.3d at 1319. 82. Id. 83. Id. at 1305.


Judicial Code of the U.S., instead of today’s Title 28.84 This was reflected in the language of 405(h), which stated “under section 24 of the Judicial Code of the United States.”85

Next, the Eleventh Circuit noted that federal and bankruptcy court juris-diction laws were recodified in 1948.86 Both district and bankruptcy court ju-risdiction laws were moved from Section 24 of the Judicial Code to Title 28 of the U.S. Code.87 Congress also decided to separate the jurisdiction laws into different sections: 28 U.S.C. § 1331 for original jurisdiction; 28 U.S.C. § 1332 for diversity jurisdiction; and 28 U.S.C. § 1334 for bankruptcy jurisdiction.88 This is where the problem for Medicare disputes in bankruptcy began.

Due to the change of federal court jurisdiction from Section 24 of the Ju-dicial Code to Title 28 of the U.S. Code, the Law Revision Counsel needed to update § 405(h).89 In 1976, the current version of § 405(h) was created.90 “Sec-tion 24 of the Judicial Code” was replaced with “sections 1331 or section 1346 of title 28.”91 This meant, in the text of § 405(h), only jurisdiction under §§ 1331 and 1346 were expressly barred from hearing Medicare disputes—the tex-tual language that still stands today.92

This change had major implications for bankruptcy courts that were pre-viously barred from hearing Medicare claims under § 405(h) because they were included under the general bar of Section 24 of the Judicial Code. After bank-ruptcy was recodified to Title 28 § 1334, bankruptcy courts were omitted from § 405(h)’s jurisdictional bar.93 This change occurred in two recodifications—Section 24 of the Judicial Code to Title 28 of the U.S. Code in 1948 and the re-codification of § 405(h) in 1976.94 The latter change left bankruptcy courts free from the bar of § 405(h), and still stands today.95

Yet when the Eleventh Circuit parsed through the legislative history of § 405(h), it found no written intent from Congress that bankruptcy courts should suddenly have jurisdiction over Medicare disputes.96 Therefore, the Eleventh Circuit reasoned bankruptcy courts must have developed jurisdiction over Medicare disputes due to a “codification error” because Congress did not 84. Id. (citing Judicial Code, Pub. L. No. 61-475, 36 Stat. 1087 § 24(19)–(20) (1911)). 85. Id. (citing Social Security Amendments of 1939, Pub. L. No. 76-379, 53 Stat. 1360 (1939)). 86. Id. 87. Id. (citing U.S. Code, Title 28, Pub. L. No. 80–773, 62 Stat. 869 (1948)). 88. Id. (citing U.S. Code, Title 28, Pub. L. No. 80–773, 62 Stat. 869 (1948)) (“As part of that revision, Congress split the district courts’ jurisdictional grants into multiple sections under Title 28.”). 89. Id. at 1306. 90. Id. (citing 42 U.S.C. § 405 (1976)). 91. Id. 92. See 42 U.S.C. § 405(h) (2012). 93. See In re Bayou Shores SNF, 828 F.3d at 1305 (“It is thus undisputed that under the original text of § 405(h), bankruptcy court jurisdiction over Medicare claims was barred.”). 94. See generally id. at 1305–06 (discussing changes and recodification of Section 24 of the Judicial Code and § 405(h)). 95. See id. at 1306–10; Samuel R. Maizel & Michael B. Potere, Killing the Patient to Cure the Disease: Medicare’s Jurisdictional Bar Does Not Apply to Bankruptcy Courts, 32 EMORY BANKR. DEV. J. 19, 23–24 (2015). 96. In re Bayou Shores SNF, 828 F.3d at 1319.


express any intent to “revers[e] forty years of Congressional policy” in which bankruptcy courts did not have jurisdiction over Medicaid disputes.97

The Eleventh Circuit’s belief that a substantive change during the codifi-cation process be “clearly expressed” relied upon prior Supreme Court cases.98 In Tidewater Oil Co., the Supreme Court held the court of appeals did not have extended jurisdiction over interlocutory orders because no language in the Re-visionary Notes expressed such a substantive change.99 Further, the Eleventh Circuit turned to Muniz, where the Supreme Court stated, “[we] cannot accept the proposition that Congress without expressly so providing, intended in § 3692 to change the rules for enforcing injunctions.”100

The “clearly expressed” doctrine applied by the Eleventh Circuit was best articulated by Justice Antonin Scalia in Finley: “[u]nder established canons of statutory construction, it will not be inferred that Congress, in revising and con-solidating the laws, intended to change their effect unless such intention is clearly expressed.”101 The Eleventh Circuit followed Justice Scalia’s logic in reasoning that because there was no clearly expressed intent from Congress to give bankruptcy courts’ jurisdiction over Medicare disputes, the text of § 405(h) should be read to bar bankruptcy courts from deciding such claims.102

The result of the Eleventh Circuit’s decision is that all Medicare disputes should first be “channeled” through the administrative agency.103 Thus, the Bayou Shores nursing facility should have first sought relief through a hearing with the HHS before a bankruptcy court decided the issue.104 For support, the Eleventh Circuit cited to the Supreme Court in Shalala, which noted, § 405(h) “give[s] HHS a greater opportunity to ‘apply, interpret, or revise policies, regu-lations, or statutes without possibl[e] premature interference by different indi-vidual courts.’”105

Applying Shalala, the Eleventh Circuit found when the bankruptcy court deemed the nursing facility safe from jeopardy, they effectively reversed the HHS decision and “interfere[d] with HHS’s role in deciding who is eligible to participate in Medicare/Medicaid.”106 The court reasoned:

[T]hough charged with broad jurisdiction to deal with issues related to a debtor’s bankruptcy estate, bankruptcy courts generally lack the institu-tional competence or technical expertise of HHS to oversee the health and

97. Id. 98. See infra notes 100–02. 99. Id. at 1316–17 (citing Tidewater Oil Co. v. United States, 409 U.S. 151, 162 (1972)). 100. Id. at 1317 (citing Muniz v. Hoffman, 422 U.S. 454, 456–57 (1975)). 101. Id. at 1318 (citing Finley v. United States, 490 U.S. 545, 553–54 (1989)). 102. Id. at 1304, 1320. 103. See id. at 1309–10 (citing Shalala v. Illinois Council on Long Term Care, Inc., 529 U.S. 1, 13 (2000)). 104. See id. at 1326–27 (“HHS, not the bankruptcy court, has been charged by Congress with administer-ing the Medicare Act and regulating Medicare providers.”). 105. See id. at 1325 (citing Shalala v. Illinois Council on Long Term Care, Inc., 259 U.S. 1, 1 (2000)). 106. Id.


welfare of nursing home patients or to interpret and administer a “mas-sive, complex health safety program such as Medicare.”107

As a result, Eleventh Circuit law requires a nursing facility to first have its Medicare disputes decided by the HHS before the nursing facility can adminis-ter a Chapter 11 plan—even if Medicare/Medicaid makes up 90% of the nurs-ing facility’s revenue and might jeopardize the bankruptcy estate.108

III. ANALYSIS

Bayou will have a direct impact on the ability of nursing facilities to avail themselves to the benefits of U.S. bankruptcy law.109 The Eleventh Circuit’s reasoning in Bayou was based around a complex codification argument pre-sented in Part II of this Note.110 Part III of this Note does not discredit Bayou’s legislative codification analysis. Instead, Part III discusses the practical impact Bayou’s holding will have on Medicare funded medical facilities that are left to deal with the administrative review process under the HHS.111

Further, Part III explores the conflict Bayou’s holding has with other pro-visions and purposes of bankruptcy law, such as a bankruptcy court’s exclusive jurisdiction over property of the estate, protection for the debtor under the au-tomatic stay, and the reasoning behind Congress’s implementation of the Bank-ruptcy Code.112 Additionally, Part III explores Bayou’s reliance on and distinc-tion from other existing judicial opinions on a bankruptcy court’s jurisdiction over Medicare, as well as Bayou’s apparent conflict with bankruptcy law’s pur-pose.113

A. Realities and Results of Bayou

A key function of bankruptcy courts as expressed by the Supreme Court is to “deal efficiently and expeditiously with all matters connected with the bank-ruptcy estate.”114 This function is accomplished when a bankruptcy court can efficiently hear all matters concerning the bankruptcy estate under the umbrella of § 1334 within a single court.115 The single court bankruptcy system provides the court with tools to increase efficiency, such as the ability to confirm a reor-

107. Id. at 1326 (citing Shalala v. Illinois Council on Long Term Care, Inc., 259 U.S. 1, 13 (2000)). 108. Id. at 1300. 109. See infra Section III.A. 110. See supra Section II.C. 111. See infra Subsection III.A.2. 112. See supra Section II.B. 113. See infra Subsections III.B.2–3. 114. Celotex Corp. v. Edwards, 514 U.S. 300, 308 (1995). 115. 1 COLLIER ON BANKRUPTCY ¶ 3.01[2], at 3-5 to 3-7 (Alan N. Resnick & Henry J. Sommer eds., 16th ed. 2017) [hereinafter COLLIER ON BANKRUPTCY].


ganization plan under §1141 free and clear of all claims, or the power to waive sovereign immunity of government agencies such as HHS under § 106.116

Perhaps most important is the § 362(a) automatic stay provision, which is an injunction that arises automatically upon the filing of bankruptcy and stops creditors from seizing assets of the estate.117 In a bankruptcy case concerning Medicare, the automatic stay is relevant because it disallows the HHS from immediately pulling the service provider funding from the nursing facility.118 This protection is exactly what the nursing facility debtor in Bayou sought when it filed for bankruptcy, as it wanted to keep Medicare funding in place temporarily and resolve its financial affairs.119

This relief provided by the automatic stay is central to bankruptcy law, which exists to “assist financially distressed business enterprises by providing them with breathing space.”120 The stay provides “breathing space” by prevent-ing creditors from racing to the courthouse to collect the debtor’s assets, there-by allowing the debtor an opportunity to obtain a fresh start.121 The breathing space provided by the automatic stay essentially keeps a financially sinking nursing facility afloat until the court confirms a reorganization plan.122 Without the automatic stay, a skilled nursing facility could potentially collapse.123

The Eleventh Circuit’s decision in Bayou is significant because if a nurs-ing facility is denied access to the bankruptcy court solely due to Medicare dis-putes with the HHS, it is denied many of the aforementioned protections of the bankruptcy court.124 Thus, Bayou has pragmatic ramifications that could effec-tively frustrate the purposes of bankruptcy law for several reasons: (1) it under-estimates the scope of nursing facility insolvency and the need for bankruptcy due to the growing elderly population and rising Medicare costs; (2) it poten-tially forces insolvent nursing facilities into the lengthy HHS review process without the protections of the bankruptcy court; and (3) the delay created is contrary to congressional intent.125

116. Petition for Writ of Certiorari at 5, Bayou Shores SNF v. Florida Agency for Health Care Admin., 2017 WL 475658 (U.S.) (No. 16-967) [hereinafter Petition for cert.]; see also 11 U.S.C. § 106 (2012); 11 U.S.C. § 1141 (2012). 117. See CHARLES JORDAN TABB, THE LAW OF BANKRUPTCY 244 (2d ed. 2009) (“The stay is essential to the effective realization and implementation of the two core functions of a bankruptcy case: the equitable treatment of multiple creditor claims, and the provision of a financial fresh start for an honest debtor.”). 118. Peter R. Roest, supra note 34, at 25. 119. Petition for cert., supra note 116, at 3; See generally Florida Agency for Health Care Administration v. Bayou Shores SNF (In re Bayou Shores SNF), 828 F.3d 1297, 1302–03 (11th Cir. 2016). 120. See, e.g., Maizel & Potere, supra note 95, at 50; see also TABB, supra note 117, at 244 (citing H.R. Rep. No. 95-595, 340 (1977)). 121. Maizel & Potere, supra note 95, at 50; see TABB, supra note 117, at 244. 122. Maizel & Potere, supra note 95, at 50. 123. Id. 124. See Petition for cert., supra note 116, at 26. 125. See infra Subsection III.A.3.


1. Growing Need for Sound Healthcare Bankruptcy Law

In Bayou, the Eleventh Circuit recognized its holding could potentially remove tools of bankruptcy like the automatic stay from the nursing facility.126 Without breathing space, an insolvent skilled nursing facility could be placed in dire financial straits.127 Bayou specifically acknowledged a situation where the debtor “could never assume its Medicare provider agreement since it is highly unlikely the appeals process will be complete before the debtor files for bank-ruptcy. In other words, unless the bankruptcy court can take jurisdiction over the provider agreements, Bayou Shores would cease to exist . . . .”128 Thus, while the court briefly acknowledged the impact of its holding, the issues it presents for nursing facilities may be far larger than the Eleventh Circuit imag-ined due to growing nursing facility patient counts and costs.129

For example, the debtor in Bayou received a staggering 90% of its reve-nue from Medicare/Medicaid payments.130 This number is not surprising given the general growth of Medicare spending. Total skilled nursing facility spend-ing has steadily increased from $15 billion in 2003, to over $30 billion in 2015.131 Along with total skilled nursing facility spending, Medicare costs and payments to skilled nursing facilities also grew 50% from 2003 to 2013.132 To-tal Medicare enrollment counts for medical facilities increased by almost 10 million enrollees from 2012 to 2016 alone.133 Perhaps most importantly, Flori-da—within Bayou’s jurisdiction—has the second most Medicare covered skilled nursing facilities, while California—within Town & Country’s jurisdic-tion—leads the nation in total skilled nursing facilities covered under Medi-care.134

Projections suggest that the population of people eighty years old will in-crease from 2015 to 2030, which is significant because that age group makes up the largest percentage of skilled nursing facility residents.135 Many nursing fa- 126. See Florida Agency for Health Care Admin. v. Bayou Shores SNF (In re Bayou Shores SNF), 828 F.3d 1297, 1324 (11th Cir. 2016) (discussing the possibility that a nursing home could cease to exist if it could not hear a Medicare dispute). 127. See id. 128. See id. 129. See infra discussion accompanying notes 131–36. 130. See In re Bayou Shores SNF, 828 F.3d at 1300–01. 131. See MEDPAC, REPORT TO THE CONGRESS: MEDICARE PAYMENT POLICY 194 (2015), http://www.medpac.gov/docs/default-source/reports/chapter-8-skilled-nursing-facility-services-march-2015-report-.pdf? sfvrsn=0. 132. Id. 133. Medicare Enrollment Dashboard, CTRS. FOR MEDICARE AND MEDICAID SERVS. (July 2018), https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/CMSProgramStatistics/Dashboard.html (last visited Nov. 3, 2018). 134. Medicare Service Use: Skilled Nursing Facilities, KAISER FAM. FOUND., https://www.kff.org/medicare/state-indicator/skilled-nursing-facilities/?activeTab=map&currentTimeframe=0&selectedDistributions=total-skilled-nursing-facility-covered-days-in-thousands&sortModel (last visited Nov. 3, 2018). 135. OMEGA HEALTHCARE INVESTORS, INC., SNF INDUSTRY AND EVOLVING REVENUE MODELS 21 (2016), http://www.omegahealthcare.com/~/media/Files/O/Omega-HealthCare/featured-


cilities frequently rely on Medicare, making the HHS a major player for reve-nue; yet Bayou’s holding leaves bankruptcy courts unable to hear disputes with the HHS, and unable to hear claims regarding a major source of skilled nursing facilities’ revenue.136 Bayou not only denies a nursing facility automatic stay protection but also affects reorganizational prospects if the bankruptcy court cannot coordinate a major source of the nursing facility’s revenue when con-firming a plan under § 1141.137 These concerns are added to an already troubled healthcare industry, with nursing facility insolvency already prevalent—evidenced by an increase in nursing facility bankruptcy filings in 2010–2014.138 Thus, Bayou potentially dooms an entire class of debtors through denying them access to bankruptcy relief.139

While it was not the Eleventh Circuit’s role in Bayou to base its decision solely on statistics, the numbers are still significant because they show the po-tentially grim impact of the court’s decision and the pressure it could put on nursing facilities within the Eleventh Circuit.140 Moreover, the increase of nurs-ing facility bankruptcy filings perhaps provides an explanation for why Con-gress did not add § 1334 into § 405(h), and, even if it was a “codification er-ror,” explains why Congress did not fix it.141 Indeed, nursing facility bankruptcies were a problem Congress considered as early as 2000, with one senator noting “[i]n my own State of Louisiana, we have 38 skilled nursing fa-cilities in bankruptcy. That is a figure that is very frightening.”142

2. The HHS Administrative Review Process and Bankruptcy

So far, this Note has discussed the growing number of nursing facility members, growing Medicare costs, and increased number of nursing facility bankruptcy filings.143 But how will insolvent nursing facilities fair outside the bankruptcy and under the HHS’s review process as Bayou demands? Most like-ly, not well.

The extended time frame of the administrative review process could act as a death blow to an insolvent nursing facility. If the Medicare claim cannot be heard first in the bankruptcy court, it could initially be subject to the HHS’s re-view process without any protections of the bankruptcy court.144 If the adminis-trative hearing process lasts too long, the nursing facility may run out of the

documents/August%202016 %20Evolving%20Revenue%20Presentation.pdf. 136. Florida Agency for Health Care Admin. v. Bayou Shores SNF (In re Bayou Shores SNF), 828 F.3d 1297, 1331 (11th Cir. 2016). 137. 11 U.S.C. § 1141 (2012); see TABB, supra note 117, at 1098–1100. 138. See Thomas, supra note 21. 139. Maizel & Potere, supra note 95, at 43. 140. See supra notes 131–37 and accompanying text. 141. See generally 42 U.S.C. § 405(h) (2012); In re Bayou Shores SNF, 828 F.3d at 1304–10. 142. Nursing Home Bankruptcies: What Caused Them?: Hearing Before the S. Comm. on Aging, 166th Cong. 3 (2000) (statement of Sen. John Breaux). 143. See supra Subsection III.A.1. 144. Petition for cert., supra note 116, at 26.


cash necessary to continue its operations and be forced to close its doors, leav-ing its residents and employees out of luck.145 This is the potential result of the Eleventh Circuit’s holding in Bayou, which subjects nursing facilities to HHS review.146

First, for an insolvent nursing facility to appeal a decision by the HHS to withdraw its Medicare service provider agreements, the nursing facility needs to file a redetermination with the Medicare Administrative Contractor (“MAC”).147 The nursing facility has 120 days to file; once filed, the MAC has sixty days to render a decision.148 This is only the first level of review.149

Next, either party may file another redetermination within 180 days of re-ceiving the MAC’s decision.150 This request is filed with a Qualified Independ-ent Contractor (“QIC”), who then has sixty days to rule or the claim is automat-ically appealable to the next level of review.151

The third level of review is appealable sixty days after the QIC deci-sion.152 The hearing is with an Administrative Law Judge (“ALJ”) at the Office of Medicare Hearings and Appeals (“OMHA”), who has ninety days to reach a final decision.153

Finally, the last level of administrative appeals is before a Council of Administrative Law Judges at the HHS Department Appeals Board (“DAB”).154 The nursing facility can appeal for a DAB hearing within sixty days after the ALJ decision.155 The DAB reviews decisions de novo and is the final level of review.156 Sound complex? These are the governmental hoops facing an insolvent nursing home in the Eleventh Circuit if a Medicare dispute arises between the nursing facility and the HHS. As a direct result of Bayou,157 only after completing all of the administrative appeal levels can an insolvent nursing facility file in the bankruptcy court.158

145. See generally id. at 3; In re Bayou Shores SNF, 828 F.3d at 1324; Maizel & Potere, supra note 95, at 31. 146. In re Bayou Shores SNF, 828 F.3d at 1326–27 (“§ 405(h) clearly requires administrative exhaus-tion.”). 147. U.S. DEP’T OF HEALTH & HUMAN SERVS., HHS PRIMER: THE MEDICARE APPEALS PROCESS 1 (2017), https://www.hhs.gov/sites/default/files/dab/medicare-appeals-backlog.pdf [hereinafter HHS PRIMER]. 148. Id. 149. Id. 150. Id. at 1–2. 151. Id. 152. Id. at 2. 153. Id. 154. Id. 155. Id. 156. U.S. DEP’T OF HEALTH & HUMAN SERVS., DIFFERENT APPEALS AT DAB: APPEALS TO BOARD, https://www.hhs.gov/about/agencies/dab/different-appeals-at-dab/appeals-to-board/index.html (last visited Nov. 3, 2018). 157. Florida Agency for Health Care Admin. v. Bayou Shores SNF (In re Bayou Shores SNF), 828 F.3d 1297, 1326–27 (11th Cir. 2016) (“§ 405(h) clearly requires administrative exhaustion.”). 158. HHS PRIMER, supra note 147, at 2 (noting that after HHS administrative remedies have been ex-hausted, a party may request judicial review in federal court within sixty days).


To make matters worse for insolvent nursing facilities, aside from the al-ready lengthy decision timeline, the HHS administrative process is currently facing a significant backlog.159 In the 2015 fiscal year, 1.2 billion Medicare claims were processed, with only 10% of those claims being denied first level review.160 Further, from 2010–2015, the HHS saw a 442% increase in the num-ber of appeals received annually. 161 While the volume of administrative appeals increased dramatically, funding for the HHS has remained stagnant.162 This has led to a large backlog of HHS Medicare claims.163

For example, at the third level of administrative review, there are current-ly 884,017 appeals waiting to be heard.164 The HHS estimates it will take elev-en years for OMHA to process all of these backlogged appeals.165 It gets worse: after waiting in the eleven-year backlog, an insolvent nursing facility would then be forced to wait amongst 14,874 claims waiting to be heard at the final level of administrative review under DAB.166 The HHS estimates it will take six years to process all of the pending claims in the final appeals backlog.167 The insolvent nursing facility must wait in this backlog first before it can ad-vance to judicial review in a bankruptcy or district court.168

Bayou’s holding essentially forces a nursing facility’s reorganization to come to the grinding halt of administrative review whenever a Medicare claim is in dispute. The idea that an insolvent nursing facility must wait six to eleven years to settle its Medicare disputes—either before or during its bankruptcy case— is completely contradictory to the purpose of bankruptcy law, which is to give bankruptcy courts power to “deal efficiently and expeditiously with all matters connected with the bankruptcy estate.”169 In the Eleventh Circuit, a nursing facility debtor in possession in charge of the estate no longer has the benefit of litigating Medicare disputes in the bankruptcy court.170 This acts as a death blow to the nursing facility’s reorganization prospects because it forces the nursing facility to expend its limited resources litigating throughout multi-ple levels of governmental review.171

In the event the nursing facility is already in bankruptcy, the estate pays for the debtor in possession’s time, legal efforts, and any counsel the debtor in 159. Id. at 3. 160. Id. 161. Id. 162. Id. 163. Id. 164. Id. 165. Id. 166. Id. 167. Id. 168. See Florida Agency for Health Care Admin. v. Bayou Shores SNF (In re Bayou Shores SNF), 828 F.3d 1297, 1326–27 (11th Cir. 2016) (“§ 405(h) clearly requires administrative exhaustion.”). 169. Celotex Corp. v. Edwards, 514 U.S. 300, 308 (1995) (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984)). 170. In re Bayou Shores SNF, 828 F.3d at 1325 (noting that the HHS must adjudicate the claims in the “first instance”). 171. In re Clawson Med., Rehab. & Pain Care Ctr., 9 B.R. 644, 649–52 (Bankr. E.D. Mich.), rev’d, 12 B.R. 647 (E.D. Mich. 1981).


possession must hire to litigate the claims in the administrative review pro-cess.172 These costs are all charged to the estate as an administrative expense under § 503(b) of the Bankruptcy Code,173 and are paid out of the estate ahead of the unsecured claims and creditors.174 Thus, forcing the debtor in possession to go through the backlogged HHS administrative process will not only harm the nursing facility’s prospects of reorganizing, but it will also potentially di-minish the amount of money the nursing facility’s other creditors will be paid in the plan by decreasing the total dollar amount remaining in the estate’s pot.175 If the administrative review occurs before bankruptcy is filed and with-out the automatic stay, creditors will likely still be harmed because they will “race” for the debtor’s assets and lose the benefit of a pro rata distribution.176

3. Delay Is Inconsistent with Congressional Intent

Bayou’s practical outcomes discussed in Subsections II.A.1 and II.A.2 of this Note are at ends with Congress’s initial intent for bankruptcy jurisdiction under the Bankruptcy Code, which focused on the trustee and the estate’s cost of administering the estate.177 Congress noted, “the dockets of the nonbank-ruptcy courts are likely to be more crowded . . . than in bankruptcy courts. De-lay is critical in cases where litigation is most likely to occur.”178 Congress foresaw the exact state of affairs created by Bayou, where a bankruptcy court has docket space to hear the HHS Medicare dispute yet must cede to a slower forum—here, the HHS administrative docket’s eleven and six-year backlog, respectively.179

Moreover, Congress was specifically worried about proceedings outside of the bankruptcy court causing undue delay.180 Congress was careful to note that nonbankruptcy proceedings are “likely to be paced more slowly with long-er intervals between successive steps,” and “the expense differential is likely to be most pronounced when it is necessary for the Trustee to sue the adversary party in a distant court.”181 Again, Congress’s intent when drafting the Bank-ruptcy Code describes the exact situation Bayou creates. Instead of litigating in bankruptcy court, the Medicare claims will be heard in the distant administra-tive review process.182 Further, the litigation procedure will now encompass a four-level “successive step” process of HHS administrative review, a danger

172. See generally TABB, supra note 117, at 691. 173. See generally id. 174. See generally id. at 674–75. 175. See generally id. at 674–92. 176. See id. at 4–6. 177. See infra notes 179–80 and accompanying text. 178. H.R. REP. NO. 95-595, at 46 (1977). 179. HHS PRIMER, supra note 147, at 3. 180. See H.R. REP. NO. 95-595, at 45–46 (1977). 181. Id. at 45. 182. See Florida Agency for Health Care Admin. v. Bayou Shores SNF (In re Bayou Shores SNF), 828 F.3d 1297, 1326–27 (11th Cir. 2016) (“§ 405(h) clearly requires administrative exhaustion.”).


Congress warned of when balancing the costs of the estate and trustee.183 These concerns are magnified by comparing the current lengthy process with proce-dures in place before Bayou, where the bankruptcy court was able to immedi-ately and efficiently hear the case and issue a preliminary order in less than two weeks.184

The Bayou decision will not only act as a death blow by adding more costs to the estate, it also gives the HHS a significant advantage over an insol-vent nursing facility.185 Congress specifically worried about a “division of ju-risdiction” in bankruptcy cases.186 Congress noted:

Generally, time is on the side of the defendant. If he can subject the plain-tiff Trustee to the necessity of suing in another court, he can gain addi-tional time which that necessity imposes on the Trustee. Similarly, the ex-tra expense entailed by the estate when the Trustee is forced to sue else-elsewhere gives his adversary a counter for bargaining with him.187

Post-Bayou, this situation could easily occur. The HHS can threaten to withhold their service provider agreements, and use the timely and expensive threat of the HHS’s own administrative review process as leverage over the in-solvent nursing facility.188 This leverage could even discourage litigating over the service provider claims altogether: as Congress noted, “it is common knowledge that Trustees have often foregone litigation to recover assets of es-tates because of the potential expense and other difficulties of litigating in dis-tant courts, having limited resources with which to wage such litigation.”189 Thus, when drafting the Bankruptcy Code, Congress foresaw and comprehend-ed several of the jurisdictional problems created by Bayou’s interpretation of § 405(h) and the role of bankruptcy law.

In the wake of Bayou, the HHS can currently require the debtor to first proceed through its own administrative process.190 If the estate cannot afford to litigate the Medicare claims in the lengthy administrative review process, then the HHS will be able to pull Medicare agreements—regardless of if it was justi-fied in doing so—simply because the nursing facility debtor will cease to ex-ist.191 In fact, this is why only two circuits have currently ruled on the issue.192 Medicare funded debtors simply cannot survive long enough to keep appealing up the ranks, and will certainly not be able to do so with an added layer of ad-ministrative review.193 With the combination of the increasing number of nurs-ing facility bankruptcies, more Medicare patients than ever before, and a back- 183. See HHS PRIMER, supra note 147, at 1–2; see also H.R. REP. NO. 95-595, at 45 (1977). 184. See In re Bayou Shores SNF, 828 F.3d at 1302. 185. See infra notes 187–88. 186. H.R. REP. NO. 95-595, at 44–45 (1977). 187. Id. at 46. 188. See supra Subsection III.A.2 for discussion on the HHS review process. 189. H.R. REP. NO. 95-595, at 46 (1977). 190. See Florida Agency for Health Care Admin. v. Bayou Shores SNF (In re Bayou Shores SNF), 828 F.3d 1297, 1325 (11th Cir. 2016) (noting the HHS should adjudicate the claims first). 191. See Maizel & Potere, supra note 95, at 29. 192. Petition for cert., supra note 116, at 29. 193. Id. at 25–29.


logged and lengthy HHS administrative process, nursing facilities in the Elev-enth Circuit post-Bayou face an uncertain future and potentially a death blow should they become insolvent.194 Additionally, as previously stated, the Su-preme Court has refused to decide the issue, leaving struggling nursing facili-ties with an uncertain future.195

B. Do Bankruptcy Courts Have Special Jurisdictional Status?

Bankruptcy courts have broad jurisdiction under § 1334 that encompasses many specific interests and concerns of creditors, shareholders, employees, and the debtor itself.196 This is demonstrated by § 1334(b), which provides, “not-withstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11.”197 The point of this provision is “to bring all bankruptcy-related litigation within the purview of the district court [and through 28 U.S.C. §157 the bankruptcy court], at least as an initial matter, irrespective of congressional statements to the contrary in the context of other specialized litigation.”198 Does this provi-sion give bankruptcy courts special status over an administrative agency? The debtor in Bayou suggested it does.199

Yet, in Bayou, the Eleventh Circuit stated bankruptcy courts did not have special status over the HHS: “§ 1334 does not give bankruptcy courts special jurisdiction over Medicare claims.”200 Bayou’s refusal to grant special status to bankruptcy courts is supported in three of its points: (1) the court’s analysis of the Ninth Circuit’s decisions in Town & Country and Do Sung Uhm and its dis-tinction between “courts” and “agencies;”201 (2) the court’s view that diversity lawsuits are similar to bankruptcy claims;202 and (3) the court’s emphasis on the policy interests of the HHS and Medicare, not bankruptcy courts.203

1. Bayou’s Distinction of “Courts” and “Agencies”

First, Bayou aimed to deny the special status of bankruptcy courts by at-tacking inconsistences in the Ninth Circuit’s cases and making a subtle distinc-

194. See In re Bayou Shores SNF, 828 F.3d at 1324 (noting that a nursing home could cease to exist); see supra Section III.A and accompanying discussion. 195. Cert. denied, supra note 4. 196. COLLIER ON BANKRUPTCY, supra note 115, at ¶ 3.01 (noting that § 1334(b) intends to bring all “bankruptcy-related” litigated matters into the district court). 197. 28 U.S.C. § 1334(b) (2012) (emphasis added). 198. COLLIER ON BANKRUPTCY, supra note 115, at ¶ 3.01[3]. 199. See In re Bayou Shores SNF, 828 F.3d at 1322 (emphasis added). See generally 28 U.S.C. § 1334(b) (2012). 200. See In re Bayou Shores SNF, 828 F.3d at 1332. 201. See infra Subsection III.B.1. 202. See infra Subsection III.B.2. 203. See infra Subsection III.B.3.


tion between “courts” and “agencies.”204 Yet Bayou’s reasoning overlooks the broad purposes of bankruptcy law.

The Bayou court first noted that in Kaiser, the Ninth Circuit seemed to stray from its earlier holding in Town & Country when it “hinted” that court would hold “bankruptcy jurisdiction could not trump the administrative exhaus-tion requirements of § 405(g) and (h).”205 According to Bayou, this would seem to weaken the Ninth Circuit’s previous Town & Country holding, when it stat-ed, “where there is an independent basis for bankruptcy court jurisdiction, ex-haustion of administrative remedies pursuant to jurisdictional statutes is not re-quired. We agree.”206

The Eleventh Circuit then distinguished itself from the Ninth Circuit’s later holding in Do Sung Uhm, where the Ninth Circuit reconciled Kaiser’s holding by acknowledging that bankruptcy courts have a special status under § 1334 over § 405(h) Medicare claims.207 The Bayou court pointed to Supreme Court case law in an attempt to show that both the debtor in its case and the Ninth Circuit in Do Sung Uhm were incorrect in suggesting a bankruptcy court has special jurisdiction over administrative agencies.208

Specifically, the court used the Supreme Court’s decision in MCorp Fi-nancial to reason that a bankruptcy court could not stay every administrative proceeding.209 Citing to the Supreme Court, the Eleventh Circuit reasoned sub-jecting an administrative agency (the HHS) to the exclusive jurisdiction of bankruptcy courts “conflicts with the broad discretion Congress has expressly granted many administrative entities.”210 Thus, the Bayou court reasoned Con-gress clearly granted broad discretion to administrative agencies and that § 1334’s special status is specifically over other “courts,” and not agencies.211 According to Bayou, because an administrative agency like the HHS is not technically a “court” and because Congress gave agencies broad discretion, the bankruptcy court’s special status under § 1334(b) does not apply to § 405(h) when the case concerns the HHS.212

Bayou’s distinction undermines the general interests of bankruptcy law.213 While the Supreme Court may have used the word “courts” in MCorp Finan-cial,214 the Court has also emphasized bankruptcy courts need to deal efficient-

204. See In re Bayou Shores SNF, 828 F.3d at 1322–23. 205. Id. at 1312. 206. See id. at 311–12; Sullivan v. Town & Country Home Nursing Servs., Inc. (In re Town & Country Home Nursing Servs., Inc.), 963 F.2d 1146, 1154 (9th Cir. 1991). 207. See In re Bayou Shores SNF, 828 F.3d at 1312, 1322. 208. Id. at 1322. 209. Id. at 1323 (quoting Bd. of Governors of Fed. Reserve Sys. v. MCorp Fin., Inc., 502 U.S. 32, 40 (1991)). 210. In re Bayou Shores SNF, 828 F.3d at 1323. 211. Id. 212. Id. 213. Id. 214. Bd. of Governors of Fed. Reserve Sys. v. MCorp Fin., Inc., 502 U.S. 32, 39–40 (1991).


ly and expediently with all matters concerning the bankruptcy estate.215 Surely, this general principle of bankruptcy law does not cease to exist solely because the debtor is dealing with an administrative agency. Further, while the MCorp Financial case is similar to Bayou in that both involve an administrative agen-cy, there is also an important distinction: MCorp Financial was a banking deci-sion focusing on an administrative action taken by the Federal Reserve, while Bayou is a Medicare decision focusing on an administrative action taken by the HHS Secretary.216 The nature of these administrative agencies and their role in bankruptcy is entirely different.217

Generally, the Federal Reserve acts as a prudential regulator to “regulate safety and soundness of banking practices.”218 This is dissimilar from the HHS’s role in Bayou, where the HHS not only regulated operations of the nurs-ing facility but also provided 90% of the nursing facility’s funding, making the administrative agency more akin to a creditor than a regulator.219 For example, in MCorp Financial, the debtor was a bank holding company with assets and capital stemming from its twenty subsidiary banks, and thus, was not reliant on an administrative agency for its revenue.220 But, in Medicare cases like Bayou, the nursing facility is not only regulated by the HHS, it is heavily dependent on the agency for a significant portion of its revenue.221

While Bayou may be correct that an administrative agency is not techni-cally a “court,” the HHS hearings still fit within the issues Congress anticipated when drafting the Bankruptcy Code.222 Congress expressly stated its concern for “busy dockets” and “multiple step” proceedings that would cripple a bank-ruptcy reorganization.223 While the HHS is not a “court,” surely the 1.2 billion HHS appeals and eleven-year backlog for third level review exemplify the “busy docket” concerns that rationalized Congress’s grant of broad jurisdiction to bankruptcy courts.224 Further, the HHS’s four-step level of review—and re-spective eleven-year and six-year backlog for two of those steps—are the exact “multiple step” proceedings Congress sought to avoid.225 Thus, Bayou’s subtle distinction of “courts” and reliance on MCorp Financial to circumvent the

215. Celotex Corp. v. Edwards, 514 U.S. 300, 308 (1995) (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984)). 216. Bd. of Governors of Fed. Reserve Sys., 502 U.S. at 36. 217. See infra notes 219–21. 218. See Bd. of Governors of Fed. Reserve Sys., 502 U.S. at 34 n.1. See generally BD. OF GOVERNORS OF THE FED. RES. SYS., THE FEDERAL RESERVE SYSTEM PURPOSES AND FUNCTIONS: SUPERVISING AND REGULATING FINANCIAL INSTITUTIONS AND ACTIVITIES 72 (2018), https://www.federalreserve.gov/aboutthefed/files/pf_5.pdf. 219. In re Florida Agency for Health Care Admin. v. Bayou Shores SNF (In re Bayou Shores SNF), 828 F.3d 1297, 1299 (11th Cir. 2016). 220. See Bd. of Governors of Fed. Reserve Sys., 502 U.S. at 35–37. 221. In re Bayou Shores SNF, 828 F.3d at 1300–01 (“[N]inety percent of Bayou Shores’ revenue is de-rived from carding for Medicare and Medicaid patients.”). 222. See infra notes 224–26 and accompanying text. 223. H.R. REP. NO. 95-595, at 44–45 (1977). 224. HHS PRIMER, supra note 147, at 3. 225. Id. at 1–3.


Ninth Circuit’s recognition of a bankruptcy’s unique purpose seems insensible to the goals of the Bankruptcy Code.226

2. Bayou Views Diversity Lawsuits as Similar to Bankruptcy Claims

Bayou also ignores the bankruptcy courts’ specialty in its reliance on oth-er circuits’ holdings on diversity jurisdiction under § 1332. The Eleventh Cir-cuit assumes that courts who hold that § 1332 diversity lawsuits are barred un-der § 405(h)—using a similar codification analysis—would absolutely do the same when deciding a bankruptcy case under § 1334.227 This was evident when Bayou stated: “[b]ecause we are persuaded that the 1984 amendments to § 405(h) were a codification and not a substantive change, we align ourselves with the Seventh, Eighth, and Third Circuits and hold that § 405(h) bars § 1334 jurisdiction over claims that ‘arise under [the Medicare Act].’”228 The wording of Bayou’s holding seems to mischaracterize the positions of other cir-cuits; it implies other circuits expressly ruled on the same issue under § 1334, when, in reality, they decided § 1332 diversity claims.229

First, in Biometric Health Service Inc., the Seventh Circuit held that § 1332 claims under § 405(h) were barred due to a codification error.230 This holding was later adopted by the Eighth Circuit in Midland Psychiatric231 and the Third Circuit in Nichole Medical Equipment.232 All of these cases consid-ered nonbankruptcy matters § 1332.233 While indicative of how the circuits might hypothetically rule when examining a § 1334 bankruptcy claim, the cases are neither dispositive nor in direct factual alignment with Bayou.

For example, in In re University Medical Center, the Third Circuit specif-ically noted while § 405(h) did not apply in the matter before it, the court was persuaded by the Ninth Circuit Town & Country decision: “[t]hus we agree with the Ninth Circuit that ‘where there is an independent basis for bankruptcy court jurisdiction, exhaustion of administrative remedies pursuant to other ju-risdictional statutes is not required.’”234 The Third Circuit further noted, “[t]his conclusion advances the congressionally-endorsed objective of ‘the effective and expeditious resolution of all matters connected to the bankruptcy es-tate.’”235

226. See In re Bayou Shores SNF, 828 F.3d at 1323 (noting that an administrative agency is not a court). 227. See infra note 229 and accompanying text. 228. In re Bayou Shores SNF, 828 F.3d at 1314 (emphasis added). 229. See infra notes 231–33 and accompanying text. 230. Bodimetric Health Serv., Inc. v. Aetna Life & Cas., 903 F.2d 480, 489–90 (7th Cir. 1990). 231. Midland Psychiatric Assoc. v. United States, 145 F.3d 1000, 1004 (8th Cir. 1998). 232. Nichole Med. Equip. & Supply, Inc. v. TriCenturion, Inc., 694 F.3d 340, 346–47 (3d Cir. 2012). 233. See supra notes 231–32 and accompanying text. 234. In re Univ. Med. Ctr., Inc., 973 F.2d 1065, 1073–74 (3d Cir. 1992) (quoting Sullivan v. Town & Country Home Nursing Servs., Inc. (In re Town & Country Home Nursing Servs., Inc.), 963 F.2d 1146, 1154 (9th Cir. 1991)). 235. Id. (quoting In re Town & Country Home Nursing Servs., Inc., 963 F.2d at 1154–55).


The Eleventh Circuit in Bayou attempted to distinguish the Third Circuit’s statement on the facts of that case.236 Bayou reasoned the Third Circuit’s claim concerned an HHS violation of the automatic stay, not a claim under § 405(h).237 Yet this reasoning ignores language in the Third Circuit’s second sentence noting the importance of “effective and expeditious resolution of all matters connected to the bankruptcy estate,” which points to a broader interest applicable to all bankruptcy jurisdiction under § 1334.238

Further, in this sentence, the Third Circuit specifically compared jurisdic-tion under § 405(h) with jurisdiction under § 1334, making the decision less tai-lored to only the automatic stay, as the Eleventh Circuit suggests.239 Consider-ing this sentence, one can reasonably infer the Third Circuit is not perfectly “aligned” with the Eleventh Circuit and may disagree with Bayou in a future bankruptcy case, especially considering the backlogged status of HHS adminis-trative review.240

Two scholars have suggested there are specific reasons courts may hold similarly to the Ninth Circuit and find that § 1332 is barred from § 405(h),241 while § 1334 is not, due to special bankruptcy purposes.242 As Samuel Maizel and Michael Potere noted:

Parties employing mandamus or diversity statutes in a federal district court may not face the same potential fate as a hospital that has initiated bankruptcy proceeding: slow resolution of the claim by the Medicare ap-peals process could be that hospital’s death knell. In short, debtors in bankruptcy courts fighting for their survival should be treated differently under the law.243

Thus, as Maizel and Potere provide, there is ample reason to think that a court may approach a bankruptcy analysis under § 1334 differently than a di-versity analysis under § 1332. It is no secret that debtors in bankruptcy have drastically different legal claims and seek different remedies than plaintiffs in diversity lawsuits.244 Yet Bayou’s simple reliance on other circuits’ diversity jurisdiction Medicare cases overlooks interests unique to bankruptcy law.245

3. Interests of the HHS Versus Bankruptcy Debtors

The Eleventh Circuit in Bayou had a choice. On the one hand, it could use legislative history and statutory interpretation of § 405(h) to require administra- 236. Florida Agency for Health Care Admin. v. Bayou Shores SNF (In re Bayou Shores SNF), 828 F.3d 1297, 1311 (11th Cir. 2016). 237. Id. 238. In re Univ. Med. Ctr., Inc., 973 F.2d at 1073–74 (quoting In re Town & Country Home Nursing Serv., Inc., 963 F.2d at 1154–55). 239. Id. 240. HHS PRIMER, supra note 147, at 3. 241. See Kaiser v. Blue Cross of Cal., 347 F.3d 1107, 1114 (9th Cir. 2003). 242. See Maizel & Potere, supra note 95, at 31. 243. Id. 244. See, e.g., Do Sung Uhm v. Humana, Inc., 620 F.3d 1134, 1140–41 n.11 (9th Cir. 2010). 245. See infra Subsection III.B.3.


tive review under the HHS at the expense of bankruptcy debtors. On the other hand, it could allow debtors to proceed directly in bankruptcy court, forcing the HHS to litigate outside its administrative bounds. Yet the Eleventh Circuit came to an interesting conclusion. Rather than simply decide the case on the statutory merits and legislative history of § 405(h), it attempted to justify its de-cision on policy grounds, stating: “[b]arring bankruptcy court jurisdiction is consistent with Congressional Medicare policy.”246 Thus, rather than simply choose option one or option two, Bayou specifically mentioned the benefits its decision gave the HHS, while it ignored the interests of bankruptcy debtors and downplayed the harm to the estate.247

First, the Eleventh Circuit stated, “[§ 405(g)] restricts the role of district courts to a limited review of final HHS decisions, thus reflecting Congressional policy to let HHS adjudicate.”248 The Eleventh Circuit then cited to the Su-preme Court’s Shalala decision in stating that §§ 405(g) and 405(h) “give HHS a greater opportunity to ‘apply interpret, or revise policies, regulations, or stat-utes without possibly premature interference by different individual courts.’”249

The Eleventh Circuit’s reasoning is problematic because the objectives of the HHS are at odds with those of bankruptcy.250 The HHS aims to administer a “massive, complex health and safety program”251 with a focus on suspending Medicare payments to “protect the program against financial loss.”252 In con-trast, Congress’s intent behind bankruptcy law encompasses much more—it seeks to reach an equitable solution considering the interests of debtors, share-holders, secured creditors, unsecured creditors, and other administrative agen-cies with claims against the estate.253 This is apparent in the legislative history to the Bankruptcy Code, which states: “[t]he purpose of a business reorganiza-tion case . . . is to restructure a business’s finances so that it may continue to operate, provide its employees with jobs, pay its creditors, and provide a return for its stockholders.”254

The competing purposes of Medicare and bankruptcy are similar to those of tax and bankruptcy.255 In In re Costas, the court found that extending tax policy would undermine the goals of bankruptcy, encourage forum shopping, and lead to a windfall.256 The same can be said of Bayou. While the HHS may have its interests protected through withholding the service provider agree-ments, the purposes of bankruptcy are frustrated. The administration of the es- 246. Florida Agency for Health Care Admin. v. Bayou Shores SNF (In re Bayou Shores SNF), 828 F.3d 1297, 1324 (11th Cir. 2016). 247. Id. at 1325–26. 248. Id. at 1325. 249. Id. (citing Shalala v. Illinois Council on Long Term Care, Inc. 529 U.S. 1, 13 (2000)). 250. See generally infra notes 252–55. 251. Shalala, 529 U.S. at 120. 252. LESLIE ANN BERKOFF ET AL., Ch. 1 The Health Care Industry, 15 ABI HEALTH CARE INSOLVENCY MANUAL (3d ed. 2012). 253. See, e.g., H.R. REP. NO. 95-595, at 220 (1977). 254. Id. 255. See, e.g., In re Costas, 555 F.3d 790, 797 (9th Cir. 2009). 256. Id.


tate will not be “expeditious or efficient” with the backlogged HHS process.257 Additionally, different holdings in the Ninth and Eleventh Circuits could en-courage venue shopping, and those creditors who act first to collect will cer-tainly receive a windfall.258

Finally, Congress recently addressed specific healthcare bankruptcy is-sues in the 2005 BAPCPA Amendments to the Bankruptcy Code.259 The amendments aim to make the healthcare bankruptcy process smoother by providing special administrative priority under § 508(b)(8) and allowing a pa-tient care ombudsman to be paid directly from the estate under § 330(a).260 Bayou’s holding not only places these purposes behind the HHS’s goals, but it also makes the 2005 amendments irrelevant because the special priority or di-rect payment from the estate is immaterial if the nursing facility ceases to oper-ate.261 Thus, by only considering the policy goals of the HHS, the Eleventh Cir-cuit is seemingly disregarding the interests of bankruptcy debtors.

C. Uniformity in Bankruptcy Law and Venue Shopping

The main consequence of the split between the Ninth and Eleventh Cir-cuit, and the Supreme Court’s refusal to grant certiorari,262 is the current lack of uniformity in bankruptcy law. The Constitution specifically grants Congress the power to “establish[] uniform laws on the subject of Bankruptcies throughout the United States.”263 Early Supreme Court Justice Joseph Story noted “creat-ing a uniform system” was intended to secure “equality of rights and remedies among the citizens of all the states.”264 Yet after Bayou, courts in Montana, Idaho, Washington, Oregon, Nevada, California, and Alaska will be able to hear Medicare disputes under § 405(h), while courts in Florida, Georgia, and Alabama cannot.265

The ripple of Bayou could vary by state and by district depending on whether the circuit decides to adopt the Eleventh or Ninth Circuits’ holding. This could lead to the use of venue shopping by nursing facilities. Under 28 U.S.C. §1408, a corporate debtor can file bankruptcy where it is domiciled (in-

257. See Celotex Corp. v. Edwards, 514 U.S. 300, 308 (1995). 258. See infra Section III.C. 259. Petition for cert., supra note 116, at 5–6. 260. Id.; see also 11 U.S.C. § 508(b)(8) (2012); 11 U.S.C. § 330(a) (2012). 261. See generally 11 U.S.C. § 508(b)(8) (2012); 11 U.S.C. § 330(a) (2012) (providing healthcare-specific bankruptcy relief). 262. Cert. denied, supra note 4. 263. U.S. CONST. art. I, § 8, cl. 4 (emphasis added). 264. Petition for cert., supra note 116, at 24 (citing Joseph Story, Commentaries on the Constitution of the United States § 1102, at 6 (1833)). 265. Compare Sullivan v. Town & Country Home Nursing Servs., Inc. (In re Town & Country Home Nursing Servs., Inc.), 963 F.2d 1146, 1154 (9th Cir. 1991), with Florida Agency for Health Care Admin. v. Bayou Shores SNF (In re Bayou Shores SNF), 828 F.3d 1297, 1314 (11th Cir. 2016). See generally Geograph-ic Boundaries of the United States Courts of Appeals and United States District Courts, U.S. COURTS, http://www. uscourts.gov/sites/default/files/u.s._federal_courts_circuit_map_1.pdf (last visited Nov. 3, 2018).


corporated) or where its principal place of business or assets are located.266 Thus, one possibility is that post-Bayou skilled nursing facilities will only in-corporate within the Ninth Circuit’s jurisdiction to avoid the Eleventh Circuit’s unfavorable holding.

It is also possible that skilled nursing facilities will avoid Bayou’s holding by using an “affiliate hook.”267 To accomplish this, a skilled nursing facility would obtain a shell “affiliate” in the Ninth Circuit, prior to filing bankrupt-cy.268 Then, the affiliate would file for bankruptcy because it would be favora-bly domiciled under § 1408(1) within the Ninth Circuit. Under § 1408(2), the larger parent company, the nursing facility, would file its case were the affiliate is located.269 Doing this would allow the skilled nursing facility to use the Ninth Circuit’s holding in Town & Country, which would allow the bankruptcy court to hear the Medicare disputes. While venue shopping may seem like a nursing facility’s easy solution to circumvent Bayou, it creates a risk that the Ninth Circuit’s bankruptcy courts’ dockets might become overloaded if skilled nursing facilities flock exclusively to the circuit.270 More importantly, venue shopping destroys the idea of Congress creating uniform laws on bankruptcy.271

D. Exclusive Jurisdiction over Property of the Estate

A unique function of § 1334 is it allows bankruptcy courts to develop ju-risdiction necessary to administer property of the estate under § 541(a).272 When Congress drafted the Bankruptcy Code in 1978, it intended to ensure ad-judication of all claims in a single forum.273 The Eleventh Circuit in Bayou rec-ognized the exclusivity granted to bankruptcy courts in § 1334 stating: “courts are split over the application of § 405(h) to suits arising under 1334 which grant district courts exclusive jurisdiction over bankruptcy cases.”274 Nevertheless, Bayou held that because § 1334’s exclusion from § 405(h) was a codification error, the bankruptcy court did not have jurisdiction.275 Problematically, Bay-ou’s holding looked solely to § 405(h) of the Medicare Act to determine juris-

266. 28 U.S.C. § 1408 (2012); TABB, supra note 117, at 376–77. 267. TABB, supra note 117, at 376–78. 268. Id. at 378. 269. 28 U.S.C. § 1408(1)–(2) (2012); TABB, supra note 117, at 378. 270. See, e.g., Susan Mathews, Corporate Chapter 11 Bankruptcies: The Case for Venue Reform, ABFJOURNAL (Oct. 2014), http://www.abfjournal.com/articles/corporate-chapter-11-bankruptcies-the-case-for-venue-reform/. 271. See id. 272. COLLIER ON BANKRUPTCY, supra note 115, at ¶ 3.01 (“Civil proceedings encompassed by section 1334(b)’s ‘related proceedings,’ that is, those whose outcome could conceivably have an effect on the bank-ruptcy estate fall into two main categories: (1) those that involve causes of action owned by the debtor that be-came property of a title 11 estate under section 541 . . . .”); see 11 U.S.C. § 541 (2012). 273. Northern Pipeline Constr. Co. v. Marathon Pipeline Co., 458 U.S. 50, 87–88 n.40 (1982) (citing H.R. REP. NO. 95-595, at 43–48 (1977)) (“Indeed, we note that one of the express purposes of the Act was to ensure adjudication of all claims in a single forum and to avoid the delay and expense of jurisdictional disputes.”). 274. Florida Agency for Health Care Admin. v. Bayou Shores SNF (In re Bayou Shores SNF), 828 F.3d 1297, 1302 n.7 (11th Cir. 2016). 275. Id. at 1304.


diction, and ignored the exclusive jurisdiction already granted to bankruptcy courts under § 1334.276 Instead, Bayou rejected a “broad reading” of § 1334(b), stating, “§ 1334 does not concern the allocation of jurisdiction between the bankruptcy court and HHS, and cannot trump the § 405(h) jurisdictional bar.”277

In their article published prior to Bayou, Maizel and Potere argued that § 1334(b) provides its own basis for jurisdiction, and “[Section 1334] and not the Medicare Act—should govern who determines a debtor’s disputes with Medicare.”278 This was the same argument presented by the debtor in Town & Country, who argued that whether the bankruptcy court has jurisdiction under § 1334 over the Medicare service provider agreements is not a question for the Secretary of the HHS.279 In fact, both the Ninth Circuit and the initial bankrupt-cy court in Bayou held the provider agreements were property of the estate, and thus subject to the exclusive jurisdiction of the bankruptcy court under § 1334.280 Still, in Bayou, the Eleventh Circuit focused its holding on whether § 405(h) barred § 1334, and did not extensively consider §1334’s grant of exclu-sivity over property of the estate when deciding the jurisdictional split.281

Unlike Bayou, other courts deciding this issue have strongly considered exclusive jurisdiction over property of the estate.282 For example, a bankruptcy court in Michigan deciding the same issue noted that, “[bankruptcy] court has jurisdiction over all the property of the Debtor.”283 Like the lower bankruptcy court in Bayou, the Michigan court noted that Medicare payments are property of the estate: “This proceeding seems clearly within the scope of such jurisdic-tion. It is initiated by a trustee whose appointment and actions are regulated by the Code. . . . Its resolution will have a considerable impact on the Medical Center’s estate and on its prospects for effecting a successful reorganiza-tion.”284 Yet Bayou’s decision means that the valuable property of the estate under the umbrella of § 1334 will instead be heard outside of the bankruptcy court.285

First, Bayou’s result means an administrative body will decide a key bankruptcy issue—whether service provider agreements can be used in reor-ganizing a business. The Eleventh Circuit recognized this dilemma, but noted that HHS is given greater opportunity to decide issues under § 405 without

276. Id. at 1323. 277. Id. 278. Maizel & Potere, supra note 95, at 41. 279. Sullivan v. Town & Country Home Nursing Servs., Inc. (In re Town & Country Home Nursing Servs., Inc.), 963 F.2d 1146, 1153 (9th Cir. 1991); Maizel & Potere, supra note 95, at 38. 280. Florida Agency for Health Care Admin. v. Bayou Shores SNF (In re Bayou Shores SNF), 828 F.3d 1297, 1302–03 (11th Cir. 2016). 281. Id. at 1324 (calling the reasoning of the bankruptcy court a mere “policy” argument instead of im-plementing that “policy” to interpret the jurisdictional conflict between the statutes). 282. See infra notes 284, 290 and accompanying text. 283. In re Clawson Med., Rehab. & Pain Care Ctr., 9 BR. 644, 647 (Bankr. E.D. Mich.), rev’d, 12 BR. 647 (E.D. Mich. 1981). 284. Id. 285. See Petition for cert., supra note 116, at 5.


“premature interference by different individual courts.”286 Yet whether a claim “arises under” § 405 of Medicare is potentially a moot point if Congress grant-ed bankruptcy courts their own grounds to exclusively decide cases and issues necessary for an effective reorganization.287

Additionally, Bayou reasoned that regardless of whether § 1334 was barred or not in § 405(h), a case is still subject to administrative exhaustion be-fore being subject to the judicial review of the bankruptcy court.288 A debtor filing in a bankruptcy court, however, is seeking to reorganize its financial af-fairs; if the debtor was seeking judicial review of an administrative decision, it would file in federal district court.289

Further, it is possible that a bankruptcy court administering the bankrupt-cy estate is not practicing “judicial review” under §§ 405(g) and 405(h).290 Ra-ther, a bankruptcy court exercises review over the property of the estate to en-sure all creditors are treated equally and within the scope of the Bankruptcy Code.291 Bayou’s disallowance of the bankruptcy court to administer property of the estate combats congressional intent, which is to provide bankruptcy courts power to determine the outcome of “all disputes affecting property in custody of the court.”292 Further, the bankruptcy court is not the final ruling: any decision a bankruptcy court makes regarding the substance of Medicare administration can be reviewed on appeal by a federal district court.293 Thus, Bayou’s holding effectively disrupts the bankruptcy court’s exclusive jurisdic-tion over property of the estate, and intrudes upon the court’s ability to admin-ister the estate.

IV. RECOMMENDATION

The Eleventh Circuit’s holding in Bayou has created a direct circuit split between the Eleventh and Ninth Circuits, over what the courts have deemed a “codification error.”294 The split is particularly perplexing given the ease with which a “codification error” could be resolved by either Congress or the Su-preme Court. Yet the two resolutions are at odds with each other. The Supreme Court has declined to resolve this dispute, bouncing the ball into Congress’s court; meanwhile, Congress has allowed the “error” to remain in place since it recodified § 405(h) in 1976, perhaps suggesting it is up to the courts to resolve

286. In re Bayou Shores SNF, 828 F.3d at 1324–25. 287. Maizel & Potere, supra note 95, at 41. 288. In re Bayou Shores SNF, 828 F.3d at 1327 (“Thus, even if we were to assume that § 405(h) does not bar jurisdiction under § 1334, the bankruptcy court erred by not dismissing Bayou Shores’ claim for failure to exhaust Bayou Shores’ administrative remedies first.”). 289. In re Healthback, L.L.C., 226 B.R. 464, 470 (Bankr. W.D. Okla. 1998), vacated, No. 97-22616, 1999 WL 35012949 (Bankr. W.D. Okla. May 28, 1999). 290. Id. at 469. 291. Maizel & Potere, supra note 95, at 34–35. 292. H.R. REP. NO. 95-595, at 44 (1977). 293. See generally 6-117 COLLIER BANKRUPTCY PRACTICE GUIDE P. 117.02 (Richard Levin & Henry J. Sommer eds., 2017). 294. See ROCHELLE, supra note 3, at 39–41.


the dispute.295 Thus, caught in this bind, courts are now left to interpret § 405(h) and reach a resolution.

A. Bankruptcy Courts’ Power to Abstain

Perhaps the most feasible resolution to the circuit split is already at the disposal of the bankruptcy courts: the judicial power of abstention.296 Under both 28 U.S.C. § 1334(c) and § 305 of the Bankruptcy Code, bankruptcy courts have the power to abstain from hearing a case or proceeding, despite having ju-risdiction over the matter.297 Therefore, a practical solution could be to allow the bankruptcy courts to exercise jurisdiction over Medicare disputes under § 405(h), while implementing judicial guidelines to assist bankruptcy courts in deciding when to exercise its discretion and abstain from hearing the proceed-ing, thus sending the case to the HHS for review.

Bankruptcy courts have two abstention vehicles: (1) § 305(a), which al-lows the court to abstain from hearing the entire case; or (2) § 1334(c), which allows the court to abstain from a particular adversary proceeding.298 Both ve-hicles are feasible in the current circuit split. For a case like Bayou, where 90% of the nursing facility’s revenue comes from the HHS, the bankruptcy court may decide to abstain under § 305(a) because doing so essentially dismisses or suspends the entire case.299 This could prove to be practical when it might be impossible to reorganize the nursing facility with such a large amount of the assets coming from the HHS who, in this circumstance, the bankruptcy court has determined should adjudicate the claim.

If a nursing facility’s Medicare revenue was less substantial, the court could choose to abstain under § 1334(c) because it would allow the bankruptcy court to proceed with the bankruptcy case, keep the automatic stay in place to temporarily protect the nursing facility from its other creditors, and allow the HHS to litigate in another forum.300 While both options are viable, abstaining under § 1334(c) appears to be the most practical solution for the circuit split because it keeps many of the protections of bankruptcy in place, while only po-tentially granting the party seeking to litigate in the HHS a motion for stay re-lief under § 362(d).301

Using abstention as the solution to this circuit split falls within Congress’s intent when constructing bankruptcy jurisdiction. Specifically, Congress stated: 295. See Cert. denied, supra note 4; Florida Agency for Health Care Admin. v. Bayou Shores SNF (In re Bayou Shores SNF), 828 F.3d 1297, 1305–08 (11th Cir. 2016). 296. See generally COLLIER ON BANKRUPTCY, supra note 115, at ¶ 305.05.01[1] (“Under 28 U.S.C. § 1334(c)(1), the court may, in the interest of justice, abstain ‘from hearing a particular proceeding arising un-der title 11 or arising in or related to a case under title 11.’”). 297. Id. 298. Id. 299. Id. 300. Id. at ¶ 5011.02[1] (“[E]ntry of an order of abstention is not itself cause for relief from the stay. Any party who seeks to continue litigation in a nonbankrputcy forum must move for relief from the stay and demon-strate the right to relief pursuant to 11 U.S.C. § 362(d).”) (footnote omitted). 301. See generally id. at ¶¶ 5011.02[1]–5011.02[2].


[I]n order to insure that the jurisdiction of the bankruptcy court is exer-cised only when appropriate to the expeditious disposition of bankruptcy cases, the bill codifies present case law relating to the power of abstention in particular proceedings by the bankruptcy court. Occasions arise when determination of an issue is best left to a court that decides similar issues regularly, especially if the issue is one that requires a particular expertise that the bankruptcy court does not have.302

Congress explicitly recognized that abstention could serve as a self-check solution to bankruptcy jurisdiction, especially when complex issues like Medi-care require expertise.303 But, when Medicare issues are simpler and there is a need for “expeditious disposition,”304 it seems practical to allow the bankruptcy court to resolve the matter in order to keep the nursing facility afloat. While there is the possibility that bankruptcy courts may abuse their discretion and choose not to abstain, the Bankruptcy Code provides judicial review of all bankruptcy abstention orders by the district court.305 Thus, if the HHS felt a Medicare issue was too complex for the bankruptcy court and the court should have abstained, the HHS could directly appeal the abstention order to the dis-trict court.

Starting in the bankruptcy court and appealing to the district court if ab-stention should have been exercised could potentially be a far more expedient process than starting at the bottom of the HHS administrative review and ap-pealing up four levels to reach the bankruptcy court.306 Additionally, with the possibility of HHS budget cuts,307 it perhaps makes more economic sense to place the burden of appealing on the objecting government entity rather than on the debtor’s estate. Doing so alleviates unequal bargaining power by preventing the HHS from strong-arming the estate and forcing the matter immediately into administrative review, when it knows the bankruptcy estate will not survive the lengthy administrative review process.308 Further, the abstention solution would not only provide nursing facilities with temporary bankruptcy protection but also indirectly help the HHS by removing the number of claims to be processed through the HHS’s backlogged dockets.309 If nursing facilities act in bad faith and try to abuse bankruptcy jurisdiction subject to abstention, the court could simply dismiss the case for “cause” under § 1112(b)(1).310

302. H.R. REP. NO. 95-595, at 51 (1977) (emphasis added). 303. Id. 304. Id. 305. See COLLIER ON BANKRUPTCY, supra note 115, at ¶ 305.05 n.2; id. at ¶ 5011.13. 306. See HHS PRIMER, supra note 147, at 1–2 (showing the levels of HHS administrative review). 307. Virgil Dickson, Trump Calls for $18 Billion Cut to HHS Funding, MOD. HEALTHCARE (Feb. 12, 2018), http://www.modernhealthcare.com/article/20180212/NEWS/180219983 (“President Donald Trump on Monday unveiled his $4.4 trillion fiscal 2019 budget proposal that includes sharp cuts for HHS funding. Trump’s proposed budget allocates $68.4 billion to HHS, a 21% decrease or $17.9 billion less than what the agency received in fiscal 2017.”). 308. See H.R. REP. NO. 95-595, at 46 (1977) (“Similarly, the extra expense entailed by the estate when the Trustee is forced to sue elsewhere gives his adversary a counter for bargaining with him.”). 309. Maizel & Potere, supra note 95, at 44. 310. 11 U.S.C. § 1112(b) (2012); see COLLIER ON BANKRUPTCY, supra note 115, at ¶ 1112.02[6].


B. Abstention Factors

In deciding whether to abstain, bankruptcy courts could balance several factors which would not only provide them with guidelines but also set prece-dent and provide a test which the district court could review if the HHS ap-pealed. In fact, bankruptcy courts determining tax liability already follow this practice, as they examine factors including: (i) the need to administer the case in an orderly manner; (ii) the complexity of the tax issue; (iii) the asset and lia-bility structure of the debtor; (iv) the time and length of the decision; and (v) the court’s docket.311 Bankruptcy courts deciding complex Medicare issues could consider similar factors.

First, courts could consider the possible effect the Medicare claim has up-on administration of the estate.312 This would allow the court to examine poten-tial costs to the estate when litigating in administrative review versus litigating in the bankruptcy court. Courts could also consider the amount of revenue a nursing facility receives from Medicare, the impact on other creditors, and a feasible time frame for which the estate could stay afloat if the court decided to abstain.

Second, courts could consider the complexity of the Medicare claim and whether “esoteric and technical issues predominate.”313 This would be a famil-iar practice for bankruptcy courts, as they already routinely balance the com-plexity of issues in areas like tax and domestic matters when deciding whether to abstain.314 In the Medicare context, the court may decide to examine the dif-ficulty of the Medicare provider agreements or the need for the HHS to decide health law issues of first impression.

Third, the bankruptcy court could examine evidence of venue shopping.315 As discussed in Part III of this Note, there is a possibility that debtors may seek venue in the Ninth Circuit to avoid Bayou’s holding using either domicile or an affiliate hook.316 If bankruptcy courts felt that abstaining and letting the HHS adjudicate would simply result in the debtor circumventing their decision by seeking venue in the Ninth Circuit, it may be more cost-effective for the estate to let the bankruptcy court exercise jurisdiction over the Medicare claim.317

Lastly, the bankruptcy court could balance other factors such as the finan-cial condition of the parties or the bankruptcy court’s docket. For example, if a bankruptcy court’s docket is too crowded, the debtor may not receive an expe-ditious resolution of their claim, and the interests of the HHS in adjudicating Medicare claims may trump the bankruptcy interests of debtor. Thus, there are

311. See In re Grossman, 206 B.R. 264, 266–68 (Bankr. N.D. Ga. 1997). 312. COLLIER ON BANKRUPTCY, supra note 115, at ¶ 5011.02[1]. See generally In re Grossman, 206 B.R. at 266–68. 313. COLLIER ON BANKRUPTCY, supra note 115, at ¶ 5011.02[1]. 314. See In re Grossman, 206 B.R. at 266–68; COLLIER ON BANKRUPTCY, supra note 115, at ¶ 5011.02[1] n.12–13. 315. Id. at ¶ 5011.02[1]. 316. See generally TABB, supra note 117, at 376–78. 317. See supra notes 181–82 and accompanying text.


a host of malleable factors that bankruptcy courts could consider, which could each be reduced or expanded over time. While the abstention solution is not perfect, it is already built into bankruptcy law.318 Thus, the abstention powers of the bankruptcy courts could be used immediately without waiting for con-gressional action.

V. CONCLUSION

The Eleventh Circuit’s decision in Bayou has created a sharp divide be-tween the Eleventh and Ninth Circuit regarding bankruptcy jurisdiction over Medicare disputes. While the Eleventh Circuit’s decision carefully examined the complex codification history of the applicable statute, the holding in many ways frustrates the very purpose of bankruptcy law. Largely insolvent nursing facilities that rely on Medicare for their revenue will effectively be turned away from the bankruptcy courthouse. The consequences of the recent decision are uncertain, but the reliance of nursing facilities on Medicare and the backlogged HHS administrative review process seem to create a grim future for nursing fa-cilities in the Eleventh Circuit.319 Further, with bankruptcy jurisdiction over Medicare disputes permitted in the Ninth Circuit, venue shopping is a risk.

While the Supreme Court and Congress have effectively decided to avoid resolving the conflict,320 bankruptcy courts may have a built-in solution through their power of abstention. Bankruptcy courts could first assume bank-ruptcy jurisdiction and then abstain from hearing the proceeding if certain fac-tors are met.321 This would provide an immediate resolution and provide an ef-fective test for courts to balance the purposes of bankruptcy law against the administrative interests of the HHS.322 Further, utilizing the power of absten-tion would ensure a more expeditious judicial process, and reassure insolvent nursing facilities that their bankruptcy difficulties will at least be considered.323 Thus, for those worried about their granny having to move nursing facili-ties, they could at the very least rest assured that her nursing facility will have its day in court.

318. See supra note 297 and accompanying text. 319. See supra Subsection III.A.2. 320. See Cert. denied, supra note 4. 321. See supra note 297 and accompanying text. 322. See supra Section IV.B and accompanying text. 323. See supra Section IV.B and accompanying text.

Documents

MADNESS IN MEDICARE: BAYOU CASTS …...This Note analyzes the practical effects of the Eleventh Cir-cuit’s In re Bayou Shores SNF decision by considering statistics on rising Medicare